States agree overhaul of goods, services tax

New Delhi: States on Wednesday approved the introduction of a combined goods and services tax from 2010, both at federal and state levels, which should reduce the burden on industry, a senior state official said.

In 2004, Finance Minister Palaniappan Chidambaram proposed introducing a national GST by merging all levies on goods and services from 2010. A panel was appointed by Chidambaram this year to start discussions with states and produce a roadmap.

The panel has suggested that the federal government should combine levies like excise duty and service tax into a single federal GST, while states need to merge value-added tax and local levies into a state-level GST.

“In this dual GST structure, an attempt will be made to integrate as many taxes on consumption and services as possible and feasible," Asim Dasgupta, the chairman of a committee of state finance ministers, told reporters.

“There could be more than one GST rate.

“We will ensure there is no double taxation," he said, adding the proposed GST structures would help trim the present “cascading effect" of taxes, and benefit industry and consumers.

“We accept the recommendations (of the panel)," said Dasgupta, also the finance minister of West Bengal.

He said all states would submit their views to the federal government by the end of December.

States and federal government will fix their respective GST rates after ensuring their will be no revenue loss from the proposed changes, as they are seen increasing compliance and spurring growth.